Question 1

-To maximize profits or minimize losses in the short run,the firm in Figure 8-10 should produce an output of

Accepted Answer

The answer of 
-To maximize profits or minimize losses in...

Question 2

-Figure 8-9 shows the demand schedule faced by an artist for reproductions of his paintings.What is the marginal revenue from expanding from selling reproductions to 400?

Accepted Answer

Marginal revenue is the change in total revenue from selling one more unit. Expanding sales from 300 to 400 reproductions decreases total revenue from $3,000 to $2,000, a change of -$1,000. This indicates that the marginal revenue of selling the additional 100 reproductions (from 300 to 400) is -$1,000.

Question 3

When a firm faces a downward-sloping demand curve,marginal revenue

Accepted Answer

Marginal revenue is the additional revenue earned by producing one more unit of output. In a downward-sloping demand curve, the firm can only increase its sales by reducing the price of its product, which means that the marginal revenue will be less than the price.

Question 4

-In Figure 8-8,the marginal revenue from adding the fifth unit of output is

Accepted Answer

The answer of 
-In Figure 8-8,the marginal revenue from adding...

Question 5

Hannah's Harmonicas sells 1,000 harmonicas each month at a price of $10.00 each.(She could sell as many as she wishes at that price. )If the marginal cost of producing an additional harmonica is $9.60,then

Accepted Answer

Since the marginal cost of producing an additional harmonica is less than the selling price, Hannah should produce additional harmonicas to increase her profits. Each harmonica sold above the 1,000 per month mark will add $0.40 in profit to her business. Therefore, producing more harmonicas is the best choice for Hannah to maximize her profits.

Question 6

Marginal revenue is defined as the

Accepted Answer

Marginal revenue is the change in total revenue divided by the change in the quantity of output, which is option B. Option A is incorrect because it is the formula for profit rather than marginal revenue. Option C is incorrect because it is the formula for marginal profit rather than marginal revenue. Option D is incorrect because it is the formula for average revenue, not marginal revenue. Option E is incorrect because it is the formula for total revenue, not marginal revenue.

Question 7

If marginal cost exceeds marginal revenue,

Accepted Answer

When the marginal cost exceeds the marginal revenue, it means that the cost of producing an additional unit is greater than the revenue generated by selling that unit. This results in lower profits. Therefore, the firm will lower profits by increasing output.

Question 8

If a firm faces a horizontal demand curve,marginal revenue

Accepted Answer

A horizontal demand curve indicates that the firm can sell as much output as it desires at the given market price. Thus, marginal revenue remains constant regardless of how much output the firm produces.

Question 9

If a firm chooses to produce output at the point where MR equals MC,

Accepted Answer

When a firm chooses to produce output at the point where marginal revenue (MR) equals marginal cost (MC), it maximizes its total profit (TR - TC), assuming the firm is operating with a profit. This is a fundamental principle of profit maximization in microeconomics.

Question 10

The additional revenue received by a firm from selling one more unit of output is known as

Accepted Answer

The additional revenue received by a firm from selling one more unit of output is known as marginal revenue.

Question 11

Economic analysis assumes that,for each output level,the firm

Accepted Answer

Economic analysis assumes that firms seek to produce the desired level of output at the lowest possible cost. This means that they will operate at the minimum point of their average total cost curve, which represents the lowest cost of producing a particular level of output. Therefore, choice C is the best answer. Choices A and B are incorrect because they refer to specific cost curves and do not necessarily represent the lowest cost of production for a given output level. Choices D and E are incorrect because they relate to revenue and product curves, respectively, which do not address the cost of producing a given output level.

Question 12

-Consider the firm in Figure 8-10.The marginal cost of producing the fifth unit of output is

Accepted Answer

The marginal cost (MC) of producing the fifth unit of output is the additional cost incurred by producing that unit. It is calculated by the change in total cost (TC) divided by the change in quantity (Q). Without the specific figure (Figure 8-10) provided, the correct answer cannot be determined directly from the question. However, based on the options given and typical economic principles, the choice that represents a common incremental cost for producing an additional unit in many production scenarios is $50 (C), assuming it reflects a reasonable marginal cost for an additional unit of production in a hypothetical or general context.

Question 13

If a firm faces a downward-sloping demand curve,its marginal revenue is

Accepted Answer

Marginal revenue is the change in total revenue when one additional unit of output is produced and sold. In case of a downward-sloping demand curve, the firm can only sell more by lowering the price of the product. This means that the marginal revenue earned on each additional unit sold will be less than the price of the product. Therefore, the correct answer is (C) less than price.

Question 14

-If the firm in Figure 8-10 sells five units of output,then the price must equal

Accepted Answer

Given that the firm sells five units of output, the price per unit must correspond to the point on the demand curve where quantity equals five. The correct answer is determined by identifying the price at this quantity on the demand curve provided in the figure, which is $50.

Question 15

-In Figure 8-8,the marginal revenue from adding the third unit of output is

Accepted Answer

The answer of 
-In Figure 8-8,the marginal revenue from adding...

Question 16

Marginal revenue is

Accepted Answer

Marginal revenue is defined as the change in total revenue that results from selling one additional unit of a product or service, which is calculated by dividing the change in total revenue by the change in total output.

Question 17

If total revenue falls as more output is produced,

Accepted Answer

If total revenue falls as more output is produced, it indicates that additional units of output are being sold at a lower price than previous units sold, leading to a decrease in marginal revenue. A negative marginal revenue means that producing one more unit results in a decrease in total revenue.

Question 18

-Consider the firm in Figure 8-10.The marginal revenue from selling the fifth unit of output is

Accepted Answer

The answer of 
-Consider the firm in Figure 8-10.The marginal...

Question 19

-Figure 8-9 shows the demand schedule faced by an artist for reproductions of one of his paintings.His marginal revenue falls as output rises because

Accepted Answer

The artist must lower the price on all reproductions to sell a larger quantity, which means that the additional revenue gained from selling one more unit (marginal revenue) decreases as the quantity sold increases. This is a characteristic of monopolistic competition or monopoly markets, where firms face downward-sloping demand curves.

Question 20

According to the marginal approach to profit maximization,firms should increase output as long as total revenue is rising.

Accepted Answer

According to the marginal approach to profit maximization, firms should increase output as long as marginal revenue exceeds marginal cost, not merely when total revenue is rising.

Quiz 8: How Firms Make Decisions: Profit Maximization